What to expect from the RBA meeting in July 2025

How could a rate cut affect your household?

The latest cash rate forecasts from Australia’s big four banks come off the back of recent data from the Australian Bureau of Statistics (ABS) showing that monthly headline inflation is at 2.1%; comfortably within the RBA’s target band.

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RBA decided against a double-cut last meeting

According to the minutes of the RBA’s last meeting in May 2025, the Board seriously considered whether a 50-point interest rate cut was warranted, given the outlook for the global economy having deteriorated over the preceding three months, and the rapidly evolving and unpredictable global policy environment. However, the members decided that it was not yet time to move monetary policy to an expansionary stance, given that inflation was yet to return sustainably to the midpoint of the target range. The members preferred to move cautiously and predictably in the face of prevailing global uncertainty, hence the decision to cut the cash rate by 25 points.

“A 25 basis point reduction would ensure that monetary policy settings remained predictable at a time of heightened uncertainty, given market expectations. And it would leave the Board well placed to respond as needed as the economy evolved.”

Federal Government prepared for economic uncertainty

Federal Treasurer Jim Chalmers has said that Australia is better placed and better prepared than other countries for heightened economic uncertainty and volatility around the world. This is due in part to the fact that new figures from the Australian Bureau of Statistics (ABS) show that headline and underlying inflation are now both in the bottom half of the RBA’s target band for the first time since August 2021.

“The Australian economy is not immune from instability in the Middle East, including from the recent volatility in global oil prices. That’s why the progress we have made together in the economy is so important. No major advanced economy has achieved what we have with unemployment in the low 4s, inflation below 2.5 per cent and the economy continuing to grow.”

However, the Treasurer also acknowledged that even with this progress and two interest rate cuts in three months, Australians are still under pressure and are facing global economic headwinds.

ANZ says cut is the path of least regret

ANZ is the last of the big four banks to have updated their RBA forecast. While ANZ economists previously expected rate cuts in August 2025 and February 2026, they are now forecasting cuts in July and August 2025, describing it as the “rate cut path of least regret.”

“While 75bp of easing in a relatively short time runs a risk of igniting a little more demand than might be desirable, the recent softness in retail trade means that is likely to be seen as a lower (and less consequential) risk than waiting too long for consumer demand to lift.”

ANZ still expects that the RBA will pause the current easing cycle once the cash rate reaches 3.35% to pause and assess the impact of the (by then) cumulative 100 points of rate cuts. Further cuts too soon could risk the RBA having to tighten policy in late 2026 or early 2027.

Additionally, ANZ has cut some of its fixed rates in advance of the RBA meeting, which could be the bank factoring in the possibility of further cash rate cuts.

Commonwealth Bank expects a close discussion before a cut

Economists from the Commonwealth Bank are forecasting two 25-point rate cuts this year, in July and August 2025, thanks in part to easing monthly headline inflation and the “dovish” tone of the RBA’s May meeting minutes.

“The decision to cut the cash rate in July will still be a close one. We expect there to be a discussion of both leaving the cash rate on hold and cutting by 25bp. The case to leave the cash rate on hold would be around diminished trade uncertainty since the heightened May environment, a still tight labour market and wanting to see a full quarterly CPI print. We expect though a 25bp cut will make the stronger argument.”

There is also a risk of an additional rate cut in late 2025 or early 2026. These rate cuts may in turn affect house prices around Australia, with Commonwealth Bank economists expecting home prices to lift by around 4% in 2025, supported by the RBA’s rate cutting cycle.

NAB expects a cautious cut

NAB economists are forecasting that the RBA will choose to cut the cash rate by 25 points in July 2025. Two more cuts are expected to follow in August and November, which would bring the cash rate to 3.1%.

“We have pared the pace and depth of easing relative to our previous forecast in recognition that the headwinds from the global backdrop, while still material, have eased.”

According to NAB, once the cash rate has returned to a neutral position, “the RBA can afford to become more forward looking and continue to adjust the policy stance in order to support real income growth and ensure the labour market maintains the gains relative to prior to the pandemic.” However, NAB said “the RBA also likely remains cautious in assessing how supportive policy will need to be given the still tight labour market (in their view) and prospects of only weak productivity growth over the medium term.”

Westpac says cut is not a shoo-in

Westpac economists recently updated their RBA forecasts following the latest monthly inflation data from the ABS. While they previously believed the next rate cut would be in August 2025, their forecast has been brought forward to July 2025, though they stress that “this is not the shoo-in that markets seem to think it is.”

“…what we are about to see is an RBA that was planning to cut rates soon anyway deciding it may as well get on with it rather than make a contestable argument for further delay.”

According to Westpac, there are three further cuts expected after the next one, which would bring the cash rate down to 2.85%, but the timing will depend on “the RBA’s post-meeting tone.” These extra cuts are currently forecast for November 2025, then February and May 2026, though it’s possible they could come sooner.

Cover image source: Bogdan Pigulyak/istockphoto.com